Interactive Investor

Activist wants your backing to kick out this chairman

11th November 2022 09:38

Graeme Evans from interactive investor

Unhappy with performance during a turnaround plan, this major shareholder wants change at the top. 

De La Rue (LSE:DLAR) shareholders are being asked if they want to oust Kevin Loosemore from the board, just four months after backing their chairman with 97.8% support.

The general meeting on 2 December has been called by the currency printer and security products company following a request from its second-largest shareholder, Crystal Amber, that Loosemore steps down immediately.

Crystal Amber wrote to shareholders on Wednesday, telling them that the turnaround plan instigated by Loosemore and chief executive Clive Vacher in 2019 has failed.

It pointed out that the former FTSE 100-listed company is now worth £187 million after two profit warnings in 2022, adding that the strategy has become too reliant on cost cutting.

The activist investor said: “Top line growth is what is required and is lacking, but Crystal Amber has found De La Rue unable to communicate a strategy for growth.”

It argues that De La Rue’s two divisions Currency and Authentication command a far higher strategic value than their operational value. It adds: “Currency suffers from over-capacity. De La Rue, as market leader by volume, is ideally placed to participate in this consolidation.”

Crystal Amber became a shareholder in 2018 and supported the company’s rights issue in July 2020 by investing a further £18 million at 110p. The shares have fallen 53% in the past 18 months and now trade on eight times earnings.

The fund’s call for Loosemore to go comes after its own request for a seat on the De La Rue board was turned down at the end of September.

De La Rue says it is disappointed at Crystal Amber’s move, particularly when the former Cable & Wireless and Motorola executive got near unanimous support at July’s AGM.

It told shareholders: “The board has engaged with Crystal Amber on a number of occasions and so is disappointed that it has chosen to pursue this course of action.

“However, the board has concluded that it is in the company’s best interests to bring this matter to a conclusion in short order.

“This way, the board and the company can continue to deliver, without unnecessary distraction, its strategy for the long-term benefit of its shareholders as a whole.”

PZ Cussons

When: 10.30am, Thursday 24 November.

Where: Manchester Business Park, 3500 Aviator Way, Manchester, M22 5TG.

How to participate: Questions on the business of the meeting can be submitted in advance to Proxy voting instructions must be received by the company’s registrar by no later than 10.30am on Tuesday, 22 November. More AGM details can be found here.

Who’s in the chair? Caroline Silver, who joined the PZ Cussons (LSE:PZC) board in 2014 and became chair in 2017. She has held corporate finance and M&A positions at Morgan Stanley and Merrill Lynch. 

How did the company do in the year to 31 May? Revenues at the Carex and Imperial Leather consumer goods business declined 1.7% to £592.8 million as currency movements and disposals offset like-for-like sales growth. Adjusted profits of £66.6 million were ahead of City expectations, but down 2.9% after pricing and productivity initiatives were needed to address cost inflation of about £40 million. Adjusted basic earnings fell 3.1% to 12.71p a share. A final dividend of 3.73p is due to be paid on 30 November, representing a 9% increase on a year earlier and leaving the total for the period 5.1% higher at 6.40p.

How have shares performed? Down 22% to 202.5p (204.5p on Thursday).
How much is the boss paid? September’s 3.5% increase for Jonathan Myers is in line with the average rise for the workforce and takes his base salary to £612,979.  His remuneration for 2021/22 came to £1.15 million, down from £1.52 million the previous year, after an annual bonus of £483,276 represented 54% of the maximum opportunity. Long-term incentive shares to the value of 150% of salary were granted during the year.

What’s the view of voting agencies? Glass Lewis highlights the 10.5% pay rise handed to chief financial officer Sarah Pollard, which has taken her base salary to £370,000. It prefers smaller incremental increases over a longer time frame, but accepts the company’s explanation about her lower starting salary and strong contribution since taking on the role in January 2021. The agency recommends voting in favour of the annual remuneration report.

How did last year’s AGM go? The annual remuneration report was backed with 88.73% of votes in favour. The vote on the three-year remuneration policy got 85.18%. Resolutions on the re-election of Kirsty Bashforth and Dariusz Kucz were passed with more than 20% of independent shareholders against. The company said this reflected the concerns of a small number of significant shareholders over remuneration targets and share ownership.

How’s the company doing on diversity? The company has already achieved the new Financial Conduct Authority guidelines of 40% women on the board, at least one member from a minority ethnic background and at least one senior position held by a woman.

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